Honeywell Invests in Energy Storage Start-Up, ESS Tech
Industrial technology giant Honeywell International has announced its investment in energy storage start-up ESS Tech, resulting in a significant increase in the start-up’s stock value. Honeywell and ESS Tech revealed a “strategic collaboration” aimed at advancing technology development and market adoption of iron flow battery energy storage systems.
As part of the agreement, Honeywell will invest $27.5 million in ESS Tech and will also purchase up to $300 million of the start-up’s batteries. The investment aligns with Honeywell’s goal of helping its customers reduce their carbon footprints by incorporating storage into renewable power generation options.
“The demand for long-duration energy storage represents a compelling market opportunity within the energy transition and the combination of Honeywell and ESS technology can accelerate decarbonization for the commercial, industrial, and utility sectors,” said Bryan Glover, chief growth officer of Honeywell Performance Materials and Technology.
ESS Tech, with a market capitalization of approximately $260 million, will benefit greatly from the investment. The company currently has about $100 million in cash and investments but spends around $20 million per quarter to build its business. ESS Tech specializes in iron flow batteries, which use cheaper materials like iron, salt, and water, making them more cost-effective than traditional lithium-ion batteries. These batteries are also industrial-scale and can be the size of shipping containers.
The collaboration between Honeywell and ESS Tech is expected to revolutionize energy storage by enabling iron flow battery technology to store power for longer periods, up to approximately 12 hours. Currently, most utility-scale battery storage options offer only four hours of backup power. While utilities can invest in additional lithium-ion batteries to extend power duration, it comes with increased costs.
Following the announcement, ESS Tech stock rose by 23% to $1.71, while Honeywell’s shares increased by 0.6%. The S&P 500 index rose by 0.2%, and the Dow Jones Industrial Average experienced a slight decline. The investment is more significant for ESS Tech, as its stock value increased by about $45 million, compared to Honeywell’s $500 million.
Despite the positive news, ESS Tech has experienced a decline of about 59% in the past 12 months. Factors such as rising interest rates and slower-than-expected business development have affected investor enthusiasm for start-up stocks. In 2021, ESS Tech projected $300 million in sales for 2023, but Wall Street estimates sales of around $10 million for the same year.
Six analysts cover ESS Tech stock, with half of them giving it a Buy rating. The average Buy-rating ratio for stocks in the S&P 500 is approximately 55%. Analysts have set an average price target of $2.40 per share for ESS Tech stock.
Overall, Honeywell’s investment in ESS Tech demonstrates the growing importance of energy storage in the transition towards renewable power sources. The collaboration between these two companies has the potential to accelerate the adoption of iron flow battery technology and contribute to the decarbonization efforts in various sectors.